U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20923 / March 4, 2009

The Securities and Exchange Commission (“Commission”) announced that on March 4, 2009, it filed a Complaint in the United States District Court for the Middle District of North Carolina against Scott A. Livengood (“Livengood”), John W. Tate (“Tate”) and Randy S. Casstevens (“Casstevens”). The Complaint alleges that Livengood is a resident of Winston-Salem, North Carolina, and was the Chairman, President, and Chief Executive Officer of Krispy Kreme Doughnuts, Inc. (“Krispy Kreme”or “the Company”). The Complaint further alleges that Tate is a resident of Winston-Salem, North Carolina, and was the Chief Operating Officer of Krispy Kreme.
The Complaint also alleges that Casstevens is a resident of Winston-Salem, North Carolina, and was the Chief Financial Officer of Krispy Kreme. According to the Complaint, Krispy Kreme is a public issuer and a nationwide doughnut retailer and franchisor based in North Carolina.

The Complaint alleges that between February 2003 and May 2004, the Company inflated its quarterly and annual earnings and omitted to disclose the impact of certain adjustments on its ability to achieve what had become a prime benchmark of its historical performance, i.e., reporting quarterly earnings per share (“EPS”) that exceeded its previously announced EPS guidance by one cent. According to the Complaint, in the fourth quarter of fiscal 2003 and the first three quarters of fiscal 2004, the Company under accrued or reversed previously accrued incentive compensation expense pursuant to Krispy Kreme’s Senior Executive Incentive Compensation Plan. The respective under accrual and reversals, which were inconsistent with the formal incentive plan, were performed to inflate the Company’s earnings so as to meet the benchmark of exceeding the Company’s guidance by one cent. The Complaint alleges that the defendants understood the existence and significance of the under accrual and the reversals to the Company’s earnings, yet failed to disclose either to the public. In addition, the defendants described favorably the Company’s performance in earnings releases and analyst calls and did not disclose the under accrual and reversals or their impact on Company earnings. Further, the Complaint alleges that Livengood and Casstevens also signed and certified Krispy Kreme filings that misstated the Company’s financial performance. The Complaint also alleges that Tate caused Krispy Kreme to engage in a bogus round-trip transaction to falsely increase its quarterly earnings in the second quarter of fiscal 2004. Finally, the Complaint alleges that each of the defendants sold stock following the Company’s earnings announcement for the second quarter of fiscal 2004.

The Complaint charges Livengood with violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (“Securities Act”) and Rule 13a-14, promulgated under the Securities Exchange Act of 1934 (“Exchange Act”), and aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. The Complaint further charges Tate with violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 13(b)(5) of the Exchange Act and Rule 13b2-1, promulgated under the Exchange Act, and aiding and abetting violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13. The Complaint also charges Casstevens with violations of Section 17(a)(3) of the Securities Act and Section 13(b)(5) of the Exchange Act and Rules 13a-14 and 13b2-1, promulgated under the Exchange Act, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13. On the same day the Complaint was filed, the defendants consented to orders permanently enjoining the defendants from future violations, disgorgement of ill-gotten gains with prejudgment interest, and the imposition of civil penalties against defendants. The defendants consented to the entries of the final judgments without admitting or denying the allegations of the Complaint.

The Commission thanks the United States Attorney’s Office, Southern District of New York, for its assistance in this matter.